Complexity and Crisis in the Financial System Critical Perspectives on the Evolution of American and British Banking
Critical Perspectives on the Evolution of American and British Banking
Edited by Matthew Hollow, Folarin Akinbami and Ranald Michie
Chapter 10: The historical development of the US government’s responses to economic and financial crises
AbstractThis chapter analyses the historical development of the US government’s involvement in the economy. The focus is on the government’s responses to economic and financial crises in particular. Overall, it is argued that the government has assumed a more active role in managing crises over time. To frame this development, Pryor’s (1996) definition of complexity is employed. As the economy has grown increasingly complex by Pryor’s measures, so too has the government’s involvement in the economy. This is seen through the government’s reactions to economic and financial crises. For example, while protectionism was one of the only policy options available to the relatively small federal government during the 1890s depression, by the 1930s this policy tool had proved to be ineffective as the economy had developed considerably during the intervening years. The myriad policy responses to the 2007–09 financial crisis highlight the increased complexity of the economy and the government’s role in it, especially when compared to earlier crisis periods.
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